LIC’s profit from equity investment up 16.6%

Life Insurance Corporation (LIC) has made a profit of Rs 42,000 crore from investments in the equity market in the financial year ended March 31, 2022. This is 16.6% higher than the Rs 36,000 crore profit made in FY21, managing director Raj Kumar told reporters a day after the insurance company announced its first quarter results after being listed. Of its total assets (AUM) under management, 25% remains in equities, while the remainder is allocated to bonds and other instruments. “Our investment strategy is based on prescribed norms and we are mandated to invest 50% in government securities,” Kumar said on Tuesday.

The management further said that LIC will focus on non-participating products to drive growth in the future. In FY22, 29% of new business, in premium terms, came from non-participating products, while sales of insurance policies contributed 7% to new business. Going forward, LIC plans to focus on ULIPs (unit-linked insurance products), health insurance and group protection products. LIC’s claims payouts stood at Rs 1.2 trillion in FY12, an increase of 19% year on year, mainly due to residual impact of COVID and payments made against maturity of several products.

However, the company has created a Covid-19 reserve of Rs 7,400 crore for claims related to the pandemic. “The higher claims were paid, due to some residual impact of Covid-19 and the payments made for the maturity of four high-value products, exceeding Rs 5 lakh,” Kumar said. He further said that the worst of the pandemic is over now.

LIC’s yield on investment declined to 8.55% in FY12 from 8.69% in FY2011. “While investing policyholders’ money, the main concern of any life insurer is the safety of the money invested, not the returns. A return of 8.55% is great in a depressed market. We invest in corporate bonds, which give us slightly higher returns. Also, we are investing very aggressively in equity markets as well,” Kumar said.

However, the insurer’s senior management said the fourth quarter numbers announced on Monday were not comparable with numbers during the same period last year, as the company started including quarterly numbers only from September 2021. Much to the Street’s dismay, the insurer has also not disclosed its underlying value when disclosing its results.

While the quarterly numbers disappoint, for the full financial year 2021-22, LIC’s profit after tax grew 39% to Rs 4,043.12 crore from Rs 2,900.57 crore reported a year ago. Kumar said the company is in the process of finalizing the embedded value numbers. “As soon as the exercise is completed, LIC will make necessary public disclosures of the same,” he said. According to the offer documents filed by LIC before it was listed, its embedded value was Rs 5.4 trillion. The underlying value is one of the key indicators of an insurer’s corporate value.

LIC’s share price fell 3.05% to close at Rs 811.50 on BSE.

Kumar said that as the company’s business progresses, it will require more capital, which in turn will benefit the shareholders in the form of increased profits.